[kvm_mkdb]

The recent meeting of the G7 finance ministers and central bank governors concluded condemning excess volatility and disorderly movements in exchange rates - obviously referring to the recent free-fall of the US dollar and its implications.

Former Republican Senator Tim Ferguson published a long, insightful article on his website titled "A New American Century? Not!".

Some interesting tidbits:

Despite the apparent swift U.S. military success in Iraq, the U.S. dollar has yet to benefit as safe haven currency. This is an unexpected development, as many currency traders had expected the dollar to strengthen on the news of a U.S. win. Capital is flowing out of the dollar, largely into the Euro. Many are beginning to ask whether the objective situation of the U.S. economy is far worse than the stock market would suggest. The future of the dollar is far from a minor issue of interest only to banks or currency traders. It stands at the heart of Pax Americana, or as it is called, The American Century, the system of arrangements on which America's role in the world rests.

Yet, even as the dollar is steadily dropping against the Euro after the end of fighting in Iraq, Washington appears to be deliberately worsening the dollar fall in public comments. What is taking place is a power game of the highest geopolitical significance, the most fateful perhaps, since the emergence of the United States in 1945 as the world's leading economic power.

In this power game, least understood is the role of preserving the dollar as the world reserve currency, as a major driving factor contributing to Washington's power calculus over Iraq in the past months. American domination in the world ultimately rests on two pillars -- its overwhelming military superiority, especially on the seas; and its control of world economic flows through the role of the dollar as the world's reserve currency. More and more it is clear that the Iraq war was more about preserving the second pillar -- the dollar role -- than the first, the military. In the dollar role, oil is a strategic factor.

Unlike the earlier periods after 1945, in the new era, the U.S. freedom to grant concessions to other members of the G-7 is gone. Now raw power is the only vehicle to maintain American long-term dominance. The best expression of this argument comes from the neo-conservative hawks around Paul Wolfowitz, Richard Perle, William Kristol and others.

The point to stress, however, is that the neo-conservatives enjoy such influence since September 11 because a majority in the U.S. power establishment finds their views useful to advance a new aggressive U.S. role in the world.

Rather than work out areas of agreement with European partners, Washington increasingly sees Euroland as the major strategic threat to American hegemony, especially 'Old Europe' of Germany and France. Just as Britain in decline after 1870 resorted to increasingly desperate imperial wars in South Africa and elsewhere, so the United States is using its military might to try to advance what it no longer can by economic means. Here the dollar is the Achilles heel.

Please base your comments on the entire article and not on this summary.

[quandarry]

saddam as well as other oil countries have been planning to move to the euro for their oil currency...i think that was the main reason for the american invasion of iraq.

the euro is in...

about a year ago i read that the US dollar was over valued by at least 40%...looks like the proverbial sh!t is hitting the fan.

[kvm_mkdb]

Originally posted by quandarry:
i think that was the main reason for the american invasion of iraq.

I'm not so sure that it was the main reason - the one that catalyzed it, perhaps...

Oil supply will be soon dwarfed by demand.

[voodoo]

We're getting out of oil????!!!

[entrox]

Originally posted by voodoo:
We're getting out of oil????!!!

News Flash at 11: we're running out of stuff.

That's why I'm working on alternatives, like a car powered by my own sense of self-satisfaction.

[kvm_mkdb]

Originally posted by voodoo:
We're getting out of oil????!!!

"By 2015, we will need to find, develop and produce a volume of new oil and gas that is equal to eight out of every 10 barrels being produced today" -- Jon Thompson, Director, ExxonMobil Exploration

But let's keep that for another thread, OK?

[gadster]

Originally posted by quandarry:
saddam as well as other oil countries have been planning to move to the euro for their oil currency...i think that was the main reason for the american invasion of iraq.

the euro is in...

about a year ago i read that the US dollar was over valued by at least 40%...looks like the proverbial sh!t is hitting the fan.

Saddam switched to the Euro in 2000, costing Iraq millions at first.

[itai195]

Strange... I remember reading an article, wish I saved a link, about European leaders getting worried that the Euro is overvalued compared to the dollar and that it's going to hurt European exports. Anyway, I don't pretend to understand currency markets, so I don't know why I'm posting in this thread... so here's a bunch of smilies!